Wal-Mart Stores, Inc.: Company Analysis

Strategic Overview

Wal-Mart Stores, Inc. is a global retail chain that takes pride in being the largest company in the industry throughout the world. Wal-Mart is headquartered in the United States of America, but runs its stores in Europe, Asia, and South America. The company sells a wide range of products and services including foodstuffs, electronics, furniture, clothing apparel, toys, video games, shoes, jewelry, books, music, and office supplies among many other products. Other ranges of services provided by Wal-Mart include financial services like bill payment, credit cards, money transfers, and debit cards. Further, Wal-Mart has entered into partnership with T-Mobile to provide wireless phone service. Wal-Mart also has photo services such as developing and uploading digital photos through the corporate website (Wal-Mart, 2009).

Wal-Mart is famous worldwide for its low price market strategy. This strategy seeks to offer products to customers at the lowest prices compared to its competitors. The company has divided its market into three main categories. These categories include low, average, and high-income earners. The firm’s value proposition is tied to its marketing strategy. This is where it promises everyday low prices abbreviated as EVLP. Up to 33% of the US retail market is strongly under Wal-Mart’s control. Wal-Mart pursues a differentiation strategy that has earned the company an edge in terms of competitive differentiation.

This includes the provision of unique warranties and brand images. These provisions make Wal-Mart’s customers believe they are receiving services that may not be available from other competitors.

Wal-Mart is structured into four main divisions of Realty, Specialty Stores, Sam’s Club, and International. The divisions are headed by Senior Vice Presidents or Divisional Presidents. Several stores make up a district that is headed by Market Managers. At the stores level, each one of them is headed by a General or Store Manager. Larger stores have Co-Managers who are directly answerable to the General/Store Manager. Other levels of management in the stores include Assistant Manager, Support Manager, and the Customer Service Manager.

Supply Chain Analysis

Key Inputs

People

Wal-Mart sources its workforce through job advertisements and interviews that target the selection of the best individuals. The workers are trained to be equipped with appropriate skills on service delivery before being deployed to the shop floors where they meet customers.

Buildings

Business sites, including retail stores and warehouses that are branded with the Wal-Mart logo are either purchased by the company or leased. Wal-Mart Realty is a division of the company that is charged with the responsibility of purchasing and leasing buildings occupied by Wal-Mart.

The firm chooses building assets that are strategically located within the market and undertakes its own modifications. This transforms the buildings to the intended standards set out by Wal-Mart.

Raw materials

The raw materials acquired by Wal-Mart are often in the form of processed products from different manufacturers.

These materials are sourced. Wal-Mart adds more value to the products by branding and repackaging before stocking on the stores’ shelves.

Information

Wal-Mart has an information communication technology that links its operations with those of its business partners. This ICT infrastructure provides information to the firm in the form of supply quantities, stock levels, and demand levels. Wal-Mart analyzes the data and draws out summaries that indicate demand, supply, and distribution statistics for each product. The information also helps in drawing out sales amount and the necessary legal payments.

Key Value Addition Processes

Human resources management

Wal-Mart employees are entitled to comprehensive benefits. Further, they are entitled to competitive wages in order to help provide them with job satisfaction limiting their chances of being lured by other employers. The firm encourages them to provide new ideas, communicate openly, and strive for excellence. This helps to ensure their service to customers is highly efficient. Further, this provides the workers with the right motivation to perform at their best serving the customers.

Technology Development

The technology development process enables Wal-Mart to initiate its own technological systems for the purpose of enhancing efficiency. The firm developed its own satellite, and radio frequency identification technologies. This it used to track its products. The technology development process ensures Wal-Mart enjoys competitive advantage by virtue of having the ability to control and effectively plan the flow of its products. It also pays less to manage the technology.

Unlike its competitors, Wal-Mart does not have to acquire technology from third party developers. The company employs its own IT specialists. Wal-Mart spends a significant amount of resources in performing research to establish a highly functioning IT system.

Procurement

The procurement process at Wal-Mart only involves the firm and the manufacturers. The firm does not buy products from distributors or wholesalers. This enables it to avoid product delays and the additional costs that come with distributor channels. The products are procured in the right quantities. The product is then transported to the distribution centers where cross docking is done before being shipped to the individual stores.

Flow-time Analysis

Walmart stores are fitted with Point-of-Sale systems that enable real-time data that immediately captures made purchases. The information is relayed to the supplier who immediately manufactures a new product based on the real data that is acquired along with data from historical records. The merchandise is dispatched to the distribution center or directly to the particular store to replenish the stock.

This process enables Wal-Mart to achieve a competitive advantage due to the supply process of the company operating in real time. This limits the chance of stock-outs being experienced in the stores.

Logistics

Wal-Mart owns distribution centers that are centrally placed to serve approximately 150 stores. The firm uses both third party suppliers and privately owned trucks to transport goods to the distribution centers. This enhances the competitive advantage of the company as it increases reliability.

The distribution centers undertake cross docking on the products before they are processed and shipped to stores. No inventory is held at the distribution centers. Each of the distribution centers employ radio frequency identification (RFID) that helps in segregating products, updating relevant information, and identifying pallets used by its employees through their mobile systems (Richardson, 2005).

The Role of Information Technology and e-Commerce in Serving Customers

The information technology system enables efficient communication between Wal-Mart and its suppliers. As goods are purchased from the stores, Point-of-Sale coordination tracks the movement of products indicating the specific items and the quantities available in stock. Suppliers have their systems linked directly to Wal-Mart’s internal IT system. This produces and delivers products based on how product movement is tracked in the stores. Because the firm does not hold any inventory in its stores, customers benefit from low product costs. Further, the system eliminates the need to hold inventory. This benefits customers in the sense that Wal-Mart does not experience any stock-outs.

Wal-Mart has also introduced e-commerce services that allow its customers to buy products online. This enables customers to buy products stocked by the company without necessarily visiting a store location. This enhances convenience for the customers. The customer can shop in the comfort of their office or home at their convenience. Delivery of the goods is also organized by the company to further enhance the customer’s convenience.

Key Performance Measures for Evaluating the Supply Chain

Cost of inventory

This is the cost paid by the company due to the handling of stock after acquisition from the manufacturers before being sold out to the customers.

When this cost increases, the supply chain is less efficient. The supply chain is efficient when it is maintained to the lowest possible level. Wal-Mart’s inventory costs are the most competitive in the industry. The company maintains leadership in this front (Flexible Packaging 2012).

Consistent product stocks

Consistency in product supply and availability implies that the firm’s supply chain is efficiently performing. Constant product stock-outs indicate failure by the supply chain to perform efficiently. This will result in poorly timed reordering process with inaccurate figures. Wal-Mart leads its competitors in maintaining efficient and consistent lean stock (Flexible Packaging 2012).

Diminishing customer numbers

Wal-Mart has managed to attract customers due to its ability to maintain low prices. The supply chain allows this due to maintaining costs at low levels.

An inefficient supply chain will see a decrease in the number of customers due to the company no longer having the ability to limit costs and low prices. According to Flexible Packaging (2012), Wal-Mart has the highest number of customers in its industry as the company continues to maintain its everyday low price policy.

Plan to Improve Operating Processes

Targets for Improvement

Distribution centers

Wal-Mart can improve its operations costs by eliminating the distribution centers. The cross docking and product segregation that occurs in the distribution centers can be handled at the manufacturers’ sight before the products are shipped to individual stores.

This will increase speed of delivery as trucks directly serve the stores from the suppliers’ locations without having to make stops at the distribution centers. This will also increase efficiency in terms of cutting costs even further due to the company no longer paying the cost of maintaining the delivery centers.

Transport

Wal-Mart currently owns a fleet of trucks that are used for shipping goods to the stores. Although the firm relies on outsourcing, Wal-Mart also maintains its own trucks. An alternative practice should see Wal-Mart completely outsource this service instead of privately owning its trucks. This will eliminate the burden to manage many business processes on the part of the management. With a third party in charge of the transportation sector, the company sets out its quality and efficiency standards that it demands from the transport company.

This will enable Wal-Mart’s management the opportunity to concentrate on the stores’ operations. Further, this will also enable the company to achieve increased efficiency and productivity.

Technology development

Wal-Mart is a retail company that concentrates on its core retail business. Dividing the management’s attention by formulating and running a technology development department is not a good move for the company. Instead, the firm should outsource the technology development role to a established IT firm to enhance its services. This will eliminate the need to employ many IT experts who are expensive to maintain. The company could keep a lean internal IT team would be mediate with the outsourced IT firm. This team would offer suggestions and ideas about how to improve the firm. Apart from quality service delivery, this move will also see Wal-Mart reduce its operation costs due to the efficient IT system that it will have at its disposal.

Results of Performance Improvements Regarding Product or Service

How product and service will be improved because of these changes to the supply chain activities

Distribution centers

Although Wal-Mart does not hold any inventory, the existence of its numerous distribution centers increases the operation costs to some degree. This means the firm has to pay huge amounts in leasing or purchasing buildings that eventually are transformed into the distribution centers. Other expenses such as security and fixture costs continuously inflate the overall operation costs of the firm.

Wal-Mart will achieve leaner costs in terms of operations by abolishing the existence of these delivery centers instead performing product segregation and cross docking at the manufacturers’ sites. The saved expenditure can be passed to the customers in the form of lower product prices. It will also take less time to ship products from the manufacturer to the stores.

Transport

Maintaining a fleet of privately owned trucks means that Wal-Mart must have an internal division that manages transportation. This department will require an additional number of employees including department managers and drivers who will be in charge of the trucks. The divided management attention will have an effect on the overall company management due to the trucks need to be maintained in good mechanical condition. Further, the purchase of spare parts will also have to be done constantly. This would be a challenge to Wal-Mart’s management given that the firm’s core business practice involves running a retail business. Contracting an independent transport company will increase service performance. The firm will have to be a specialist in the industry.

This means their core business activity is transportation. They have all the necessary measures in place to ensure a highly efficient transportation service. The company will have special carriers that limit product damages during transportation to almost zero. The quality of the products will be assured even when the transportation distance to be covered will be long.

Technology development

Technology is a demanding sector that involves employing trained experts. The demand is also employed for acquiring expensive equipment and gadgets. It is time consuming as experts have to take their time doing extensive research. This extensive research is done to determine an effective new technology that may accurately perform the needs of Wal-Mart. If Wal-Mart maintains this as part of its internal business, this will be difficult to achieve. This will also become expensive due to technology development not being a core retail business. Outsourcing the service to an expert third party firm will increase efficiency in terms of more reliable technology at less cost. When this is applied to the firm, it will provide Wal-Mart with even greater ability to lower costs as well as increase reliability in integrating business activities between Wal-Mart and its main partners.

How the specific features or attributes of the products and service will be altered

Applying these changes in the supply chain will see Wal-Mart maintain prices of its products at competitively lower prices. The changes target cost reduction. These benefits will be passed to the customers in form of low prices.

Why these specific changes are important to customers

Customers are continuously seeking products with lower prices with uncompromised quality.

The cost of living is becoming expensive as prices of commodities continue to rise. As prices grow out of their reach, consumers are affected by being forced to do without some basic commodities.

How these changes enhance the value proposition and competitive position of the company

Wal-Mart’s value proposition is to maintain low prices every day. Seeking to lower prices even further, the company will succeed greatly in enhancing its position as the industry’s leader by offering low commodity prices.

The specific lasting capabilities and improvement that I am introducing in Walmart through these changes

Once these changes are effectively implemented, Wal-Mart will continuously enjoy the advantage of initiating new practices that aim at lowering prices. Wal-Mart will have new ideas that will allow continuously change of operations that fail to improve cost. Wal-Mart will also adopt other ideas that are leaner.

How scope and impact of the improvements will be measured: My key performance indicators

The measure of success in terms of scope and impact of the new changes that I will use will be the overall cost amount. If the company will manage to post lower operation costs with an improved business scale, it will be a good indicator that the changes adopted in the supply chain will have yielded positive results.

Assessment of the Impact on Human Resources

The Human Resource role and responsibilities in Wal-Mart have been defined and aligned to accommodate these new changes. The departments of IT development and transport will be affected by these changes.

These departments will either have to lay off their staffs or assign them to other departments experiencing under performance due to minimal staff size.

The purchase and supplies department will take the responsibility of looking for third party companies to undertake the outsourced services. The purchase and supplies department will have the authority of directly managing the outsourcing to companies. The purchase and supplies department has individuals with the right qualities and skills to effectively handle the necessary requirements. Customers will be motivated by these new changes due to the efficiency in service delivery and low prices expected to be achieved. Suppliers will have reliable systems that relay accurate data concerning stock movements at Wal-Mart. Employees can enjoy increased salaries and benefits because more customers will translate into increased.

References

Flexible packaging. (2012). Wal-Mart continues as a leader in sustainability. Flexible Packaging, 14(5), 10-10.

Richardson, L. (2005). Wal-Mart: Benefits will be shared. SN: Supermarket News, 53(10), 6-63.

Wal-Mart. (2009). Wal-Mart. Drug Store News, 31(4A), 23-50.

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